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Webster Financial (WBS)
NYSE:WBS
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Webster Financial
(NYSE:WBS)
75Outperform
Positive Factors
Capital Flexibility
CET1 is now in excess of the company's near term operating target of 11% providing WBS with capital flexibility.
Earnings
4Q24 was a high quality earnings beat versus expectations, with operating EPS beating consensus on higher net interest income and fees.
Financial Performance
Webster completed a $665 million securities repositioning during the quarter, generating a 300 basis point yield improvement.
Negative Factors
Asset Quality
Asset quality metrics deteriorated further in 4Q24, with nonperforming and commercial classified loans increasing.
Loan Growth
Loan growth for 4Q24 was guided to 1.0%-1.5%, slightly below prior estimates.
Loan Quality
Credit metrics were generally weaker with sequential upticks in nonperforming loans and commercial classified loans.
Webster Financial (WBS) vs. S&P 500 (SPY)
Market Cap
$7.26B
Dividend Yield3.78%
Average Volume (3M)1.66M
Price to Earnings (P/E)9.7
Beta (1Y)1.50
Revenue Growth5.86%
EPS Growth-10.72%
CountryUS
Employees4,297
SectorFinancial
Sector Strength86
IndustryBanks - Regional
Share Statistics
EPS (TTM)4.37
Shares Outstanding171,345,060
10 Day Avg. Volume1,935,253
30 Day Avg. Volume1,656,112
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)3.73
Price to Cash Flow (P/CF)2.50
P/FCF Ratio1.80
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$64.30Price Target Upside51.76% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering10
Webster Financial Business Overview & Revenue Model
Company DescriptionWebster Financial Corporation (WBS) is a financial services company headquartered in Stamford, Connecticut. The company operates primarily through its subsidiary, Webster Bank, N.A., offering a wide range of banking, investment, and financial services. Webster Financial provides services to individuals, families, and businesses, focusing on commercial banking, retail banking, and wealth management. It caters to clients across various sectors with a strong presence in the Northeastern United States.
How the Company Makes MoneyWebster Financial makes money primarily through interest income generated from loans and leases, including commercial loans, consumer loans, and residential mortgages. The company also earns revenue from investment securities and other financial products. Additionally, Webster Financial generates non-interest income through fees and service charges, including fees from deposit-related services, wealth management services, loan servicing, and treasury and payment solutions. The bank's profitability is influenced by its net interest margin, loan growth, asset quality, and operational efficiency. Strategic partnerships and a focus on expanding digital banking capabilities also play a significant role in enhancing Webster Financial's revenue streams.
Webster Financial Financial Statement Overview
Summary
Webster Financial exhibits strong revenue growth and improved net profit margins, indicating robust financial health. The balance sheet is solid, with effective debt management and equity growth, although increased liabilities pose a potential risk. Cash flow data limitations restrict a comprehensive evaluation.Income Statement
Webster Financial's revenue has shown significant growth from $1.17 billion in 2020 to $3.93 billion in 2024, reflecting a robust expansion trajectory. The gross profit margin remains consistently high as gross profit is equal to total revenue. The net profit margin improved substantially, indicating better cost management and operational efficiency. The EBIT margin has also increased, showcasing strong operational performance. However, the absence of EBITDA data limits a full analysis of operational cash generation capabilities.85
Very Positive
Balance Sheet
The balance sheet is strong with a solid equity base growing steadily to $9.13 billion by 2024. The debt-to-equity ratio is healthy and shows a decrease over the years, suggesting effective debt management. The equity ratio is stable, indicating a solid asset base supporting equity. Return on equity has improved, showcasing enhanced profitability. However, the total liabilities have increased, which could pose a risk if not managed effectively.78
Positive
Cash Flow
Operating cash flow has been positive, although there is missing data for 2024. Free cash flow was strong in 2023, but unreported for 2024. The free cash flow to net income ratio showcases a capability to generate cash, but the missing data for 2024 limits a comprehensive evaluation. Financing cash flows have been high, reflecting capital management strategies. The absence of clear free cash flow growth rate and operating cash flow to net income ratio for 2024 presents an incomplete cash flow picture.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 3.93B | 2.50B | 2.47B | 1.22B | 1.17B | Gross Profit |
| 3.93B | 2.50B | 2.47B | 1.22B | 1.17B | EBIT |
| 3.91B | 1.09B | 1.05B | 533.86M | 279.97M | EBITDA |
| 0.00 | 0.00 | 880.65M | 575.37M | 323.15M | Net Income Common Stockholders |
| 768.71M | 867.84M | 644.28M | 408.86M | 220.62M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 9.39B | 1.52B | 8.73B | 4.70B | 3.59B | Total Assets |
| 79.03B | 74.95B | 71.28B | 34.92B | 32.59B | Total Debt |
| 909.18M | 3.41B | 6.53B | 573.93M | 700.83M | Net Debt |
| 521.13M | 1.69B | 5.69B | 112.36M | 437.72M | Total Liabilities |
| 69.89B | 66.26B | 63.22B | 31.48B | 29.36B | Stockholders Equity |
| 9.13B | 8.69B | 8.06B | 3.44B | 3.23B |
| Cash Flow | Free Cash Flow | |||
| 1.37B | 938.35M | 1.31B | 672.00M | 359.27M | Operating Cash Flow |
| 1.40B | 978.65M | 1.34B | 688.59M | 380.55M | Investing Cash Flow |
| -3.87B | -2.60B | -7.19B | -2.41B | -2.29B | Financing Cash Flow |
| 2.82B | 2.49B | 6.23B | 1.91B | 1.91B |
Webster Financial Technical Analysis
Negative
42.37
Price Trends
52.93
Negative
55.41
Negative
51.14
Negative
Market Momentum
-0.91
Negative
40.86
Neutral
25.26
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WBS, the sentiment is Negative. The current price of 42.37 is below the 20-day moving average (MA) of 48.64, below the 50-day MA of 52.93, and below the 200-day MA of 51.14, indicating a bearish trend. The MACD of -0.91 indicates Negative momentum. The RSI at 40.86 is Neutral, neither overbought nor oversold. The STOCH value of 25.26 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WBS.
Webster Financial Risk Analysis
Webster Financial disclosed 47 risk factors in its most recent earnings report. Webster Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Webster Financial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $7.63B | 14.69 | 16.67% | 1.84% | -2.75% | 11.75% | |
76 Outperform | $6.97B | 15.10 | 7.62% | 1.00% | 14.99% | -16.42% | |
75 Outperform | $7.26B | 9.69 | 8.54% | 3.78% | 5.86% | -10.72% | |
69 Neutral | $6.93B | 12.15 | 15.13% | 3.50% | 7.81% | -2.49% | |
66 Neutral | $6.70B | 10.19 | 10.72% | 5.56% | -6.54% | -21.90% | |
64 Neutral | $13.37B | 9.30 | 9.39% | 4.85% | 16.11% | -8.85% | |
58 Neutral | $6.98B | 8.92 | 12.32% | 2.37% | 13.60% | 8.85% |
* Financial Sector Average
Performance Comparison
WBS
Webster Financial
42.37
-2.04
-4.59%
CMA
Comerica
51.04
2.70
5.59%
CBSH
Commerce Bancshares
56.88
8.93
18.62%
CFR
Cullen/Frost Bankers
107.73
3.05
2.91%
PNFP
Pinnacle Financial Partners
90.04
10.98
13.89%
WAL
Western Alliance
63.21
8.11
14.72%
Webster Financial Earnings Call Summary
Earnings Call Date: Jan 17, 2025 | % Change Since: -26.39% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Positive
The earnings call reflects a generally positive outlook, with strong financial performance and strategic growth initiatives in place. However, challenges in specific credit portfolios and regulatory pressures present ongoing obstacles.Highlights
Strong Financial Performance
Webster reported an adjusted return on tangible common equity of 17.7%, an adjusted return on assets of 1.27%, and an efficiency ratio of just below 45% for Q4 2024.
Deposit Growth
Deposits grew by $239 million, with significant contributions from digital channels and HSA Bank, which increased its deposits by $800 million.
Successful Integration of Ametros
The acquisition of Ametros added low-cost, long-duration deposits, growing its balances to just over $1 billion from $800 million at the time of acquisition.
Positive Margin Outlook
Net interest margin (NIM) expanded slightly, and the company expects 2025 NIM to be in the range of 3.35% to 3.40%.
Proactive Investment Strategy
Investments in data and analytics capabilities, treasury management, and digital banking channels are expected to enhance future growth and operational efficiency.
Lowlights
Office and Healthcare Services Challenges
Net charge-offs totaled just over $60 million, with 60% of those charges coming from traditional office-related or healthcare services credits.
High Charge-off Rates
2024 overall net charge-offs approximated 30 basis points, which is at the high end of the company's target range.
Regulatory and Expense Pressures
Incremental expenses are expected in preparation for transitioning to a Category 4 bank, with $15 million to $20 million in incremental run-rate operating expenses projected for 2025.
Company Guidance
During the Webster Financial Corporation's Q4 2024 earnings call, the company provided guidance with several key metrics for the upcoming year. Webster anticipates loan growth of 4% to 5% on an end-of-period basis, supported by diverse asset classes, while expecting deposits to grow at a similar rate. They project net interest income to range between $2.45 billion and $2.5 billion, assuming a 225 basis point reduction in Fed funds starting in March, with an efficiency ratio between 45% and 47%. The bank's adjusted return on tangible common equity was 17.7% for Q4 2024, with an adjusted return on assets at 1.27%, and an efficiency ratio just below 45%. They also highlighted a strong capital position with a near-term common equity Tier 1 ratio target of 11%, and an effective tax rate around 21%. Additionally, Webster is preparing for a transition to a Category 4 bank, anticipating $15 million to $20 million in incremental operating expenses for 2025, as part of a broader $40 million to $60 million run rate operating expense increase over the next few years.Webster Financial Corporate Events
Business Operations and StrategyFinancial Disclosures
Webster Financial Reports Strong Q4 2024 Earnings
Positive
Jan 17, 2025
Webster Financial Corporation reported a net income of $173.6 million for the fourth quarter of 2024, with earnings per diluted share of $1.01. Adjusted earnings per share were $1.43, excluding certain losses and tax adjustments. The company experienced a decrease in non-interest income due to investment securities losses, but saw increases in net interest income and loans. Webster’s actions to fortify its capital and liquidity position and investments in technology and human capital are aimed at sustaining future growth.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.